Slovenia Allows Agrokor to Buy Biggest Balkan Retail Chain

Nov. 29 (Bloomberg) -- Agrokor d.d. of Croatia got
regulatory approval to take over the largest retail chain in the
Balkans, Mercator Poslovni Sistem d.d., in a sale neighboring
Slovenia will use to help its debt-laden banks.

Zagreb-based Agrokor signed an agreement with Mercator’s
owners in June to buy a 53 percent stake in the Slovenian
retailer for 240 million euros ($327 million), or 120 euros a
share. Mercator’s owners are drinks company Pivovarna Lasko d.d.
and Slovenian state-controlled banks Nova Ljubljanska Banka d.d.
and Nova Kreditna Banka Maribor d.d.

“We have studied if the Mercator sale would hurt the
retail market here and have concluded that wouldn’t be the case
and have no objections to this transaction,” Slovenian
competition regulator head Andrej Krasek said at a news
conference in the capital Ljubljana today.

Agrokor’s takeover bid is its fifth to buy its biggest
competitor in the Balkans. Croatia’s largest company, with
interests in food production, retail and press distribution,
last offered 221 euros per Mercator share in 2011, valuing the
retailer at 832 million euros, before abandoning the bid in
early 2012 amid opposition from Slovenian politicians.

The acquisition will to create one of the biggest companies
in the region, with annual revenue of as much as 7 billion
euros, Agrokor said on its website. It would employ about 60,000
people and have about 2,600 stores.

Shares Slump

Mercator shares slumped to the lowest level in more than 11
years on speculation the Croatian investor will fail to get
financing to close the takeover. The stock closed down 6.2
percent at 75 euros and volume amounted to 513 percent of the
three-month average, data compiled by Bloomberg shows.

“Investors for many reasons aren’t ready to bet” that
this takeover will succeed, Saso Stanovnik, an analyst at Alta
Invest in Ljubljana, said in an e-mail today. “The reasons are
past experience with the Mercator sale and stories in local
media about a lack of financing for the deal.”

Agrokor spokeswoman Anja Linic declined to comment on the
Mercator takeover when contacted by phone today.

Slovenia plans to use some of the sale’s proceeds to inject
much needed cash into its banks, which are burdened with bad
loans equaling about a fifth of the Adriatic state’s annual
output. It will also show the country is ready to push forward
with a plan to sell 15 state-owned companies including Mercator
shareholder Nova Kreditna Banka Maribor d.d. and phone company
Telekom Slovenije.

Bank Repair

Prime Minister Alenka Bratusek’s government is awaiting the
results of stress tests and asset quality audits of the lenders
due to be published on Dec. 13. The government has earmarked as
much as 1.4 billion euros to repair the banks, while Fitch
Ratings Ltd. and some economists have said the bill may cost
three times as much or more.

The “240 million euros will go toward covering the big
ticket cost of bank recapitalization, which could be anywhere
from 1.2 billion euros, or 3.4% of GDP, to 5 billion,” Tim Ash,
chief emerging markets economist at Standard Bank Group Ltd. in
London, said by e-mail today. “The general assumptions/hope is
that this first wave of privatizations could perhaps generate
around EUR1bn.”

Mercator employed 23,157 people at the end of September and
operates about 1,600 units in the Balkan states. The retailer
narrowed its nine-month loss to 17.6 million euros from 22
million euros a year earlier with revenue declining 3.6 percent
to 2 billion euros.

The Croatian company plans to increase Mercator’s capital
and may sell Mercator shares in a public offering next year
while merging retail operations into Adria Retail that will be
completed by the end of 2014, Finance newspaper reported in
June, citing Agrokor President Ivica Todoric.